There are many different strategies for saving money, and I thought I would share 4 that have worked for me and my clients over the years.
1. Save first, spend later.
Where possible, have your work start your savings for you by putting part of yours wages aside for you. Most payroll systems can handle requests for up to 3 bank accounts, sometimes more. Ask to have your wages paid directly into your mortgage or savings account so that it has already been paid before the rest of your wages go into your “bills account”.
If you have multiple bank accounts and you want to save money – do it first on pay day, rather than waiting to see if you have any money left over. If you can’t afford to save money first, because you always end up spending everything you have, then try saving just $1 for every $100 you earn (that’s 1%). If you can live off $100, you can live off $99. If your pay is normally $1300, then try saving $13, and living off $1287.
2. Savings go into a different bank (without internet banking).
When you set up a bank account that has no internet banking, and you deposit money into this bank account, then you have to go into the bank to withdraw the money. Create an “Out of sight, out of mind” mentality to this savings account, and you will be surprised at how quickly the bank account adds up when you don’t have access to it.
My sister-in-law did this when saving for a family cruise – and could only access the funds when she took her three kids into the bank in person to access the money (so only did it once, when ready to pay!). Because of the extra interest that was added to the savings account, she ended up with more money in the account than expected! An extra bonus to saving and not touching your money is that the bank will add interest to it, and you end up with more money.
3. Have a Focus for saving & track it regularly
If you have a target to meet, it is easy to track your progress. If you have no target to meet, then you are less likely to save. Do you want to pay off a loan? Figure out how much you can pay and then work out how long it will take to pay it off. Want to go on holidays? Set up a dedicated bank account and start sending money direct to that account every pay day.
Using a Focus keeps you single minded on what you want – and then you can make basic choices like “will I save for a holiday or will I eat takeaway food tonight?”. Tracking how much you have saved regularly is key to continually reinforce the saving behaviour, so a weekly “balance check” can help to keep you on track.
4. The $1000 project
Author Canna Campbell writes about her $1000 project. In her book, she explains that she wants to save $1,000 per week so that she can invest into shares. Every time she chose to save money that she would otherwise have spent, that cash was transferred into her “$1000 project” bank account. Examples include meeting a friend for coffee at home rather than a café (save $18) and eating groceries already in the fridge instead of out at a restaurant with drinks (save $100). Each decision contributed extra cash to her account, which grew very quickly.
Small targets are much easier to achieve and can keep you motivated longer than bigger goals. Think about this – you want to save $45,000 for a house deposit. It feels like a lot of money to save, if you try to get there in one big amount. But – if you try to save 45 lots of $1,000, there’s 45 times to celebrate your success of saving, and 45 times the effort of trying to get the money in quickly.
If you don’t have a savings routine yet, then I encourage you to pick the one method that you think might work for you and give it a go. Saving money is a practice – the more we do it the easier it gets.
